XP Factory – plans in place to offset impact of Budget without need for significant price increases, balance sheet being restructured to allow future share buy-backs and dividends: XP Factory, which operates the Escape Hunt and Boom Battle Bar brands, has said plans are in place in to offset the impact of the Budget without the need for significant price increases, and that its balance sheet is being restructured to allow for future share buy-backs and dividends. The company, which in October secured a new £10m revolving credit facility with Barclays to aid the speed of its expansion, also said in a trading update that group like-for-like sales were up 2.0% in the 9 weeks to 1 Dec 2024. It said the opening of an Escape Hunt in Glasgow in October will be followed by the launch of an Escape Hunt and Boom Battle Bar in Cambridge this Saturday (6 December), and that Booms in Southampton and Ipswich have been bought back by the company. Looking ahead, the company said it plans to increase sales by 50% and double pre IFRS 16 adjusted Ebitda by March 2028. It has set a revenue target of £90m, with a run-rate of £100m, with a pre IFRS 16 group adjusted Ebitda target of £13m, with run-rate 15% group Ebitda margins. The growth plans will be funded by cash generation and debt facility, targeting average debt-Ebitda ratios of circa 1.0x (pre IFRS 16). It comes as XP Factory reported group revenue increased 33.2% to £24.9m (H1 2023: £18.7m) in the six months ended 30 September 2024. Gross profit grew 33.6% from £11.7m to £15.6m. Escape Hunt owner operated site revenue increased 7% to £6.5m (H1 2023: £6.1m), while Boom Battle Bar owner operated revenue increased 56% to £17.6m (H1 2023: £11.3m). Pre IFRS 16 group adjusted Ebitda profit increased 30.5% to of £1.5m (H1 2023:  £1.1m), while pre IFRS16 site level Ebitda was up 11% to £5.6m (H1 2023: £5.0m). A total of £3.6m was invested in growth capex, while cash balance at 30 September 2024 was £1.9m (31 March 2024 £3.9m) and net debt £1.3m (31 March 2024: £nil). The group said it continued underlying positive like-for-like growth in both brands ahead of the industry and against strong comparators in the prior year. It said Boom was up 4.4% (5.6% excluding the two weeks of riots), while Escape Hunt up 3.0% (5.7% excluding the weeks of the Euros and the riots), and the group was up 4.0% (5.6% excluding impacted weeks). Three Boom franchise sites – in Aldgate, Wandsworth and Bournemouth – were acquired May and June 2024, while a New Escape Hunt opened in Worcester in September 2024. Boom owner operated site level Ebitda margins increased to 11.8% (H1 2023:  11.0%) and Escape Hunt owner operated site level Ebitda margins improved to 42.0% (H1 2023: 40.2%). Richard Harpham, chief executive of XP Factory, said: “I am delighted to report on another period of positive, cash generative growth in the six months to 30 September 2024, with group revenue increasing by 33.2% compared to our first half in 2023. This performance reflects continued volume-driven like-for-like growth across both of our brands, ahead of industry levels. Consumer sentiment weakened in the summer and ahead of the UK Budget, softening first half performance and, whilst we are encouraged by strong early indicators for the all-important festive season, with corporate pre-bookings significantly ahead of 2023, we remain laser focused on maximising the Christmas trade that is so important in delivering the full year's results. This is a testament to the strength of our offering, the loyalty of our customer base, and the hard work of our teams. We have also achieved important milestones to support our expansion goals. The completion of a £10m revolving credit facility with Barclays provides us with the financial ability to execute our clear plan to double group Ebitdaover the next four years. In addition, we are planning a balance sheet re-organisation to enable share buy-backs and to create capacity for dividend payments in future, should we deem it appropriate.  With a solid foundation in place, we remain confident in our ability to deliver sustainable growth and significant long-term value creation.”

Propel to launch four ground-breaking reports in 2025 for Premium subscribers, prices to be pegged: Propel will launch four ground-breaking reports in 2025 that will be available free to Premium subscribers. The Propel 500 report is an ambitious new project that will bring together the top 500 companies within the sector, offering not only comprehensive listings but also insights into the forces driving growth, innovation, and transformation across the industry. The report will be available at the end of February free for Premium subscribers. The International Report, released in spring, will examine the 100 biggest international brands expanding in the UK with analysis of turnover, market size, estate numbers and strategy. The Experiential Leisure Report will be the second edition of the report launched this year and will track the growth of the UK experiential market. The report will be available early summer. The Brands Report, launched in the autumn, will be a guide to the 500 largest foodservice brands in the UK listed by estate size. Propel managing director Paul Charity said: “There are 492 companies currently subscribed to Propel Premium, with its comprehensive overview of the UK foodservice market. We have sought to add ever more value and insight for our Premium subscribers year by year. Next year is no different, with new reports added to the existing stable of benefits, plus prices unchanged from this year.” Operators pay £495 plus VAT for an annual Premium subscription while suppliers pay £595 plus VAT. One-third of subscribers have now opted to take an unlimited subscription for £995 plus VAT, which means they can have limitless numbers of their staff receiving Premium. To sign up or to hear about the many other benefits of Propel Premium, email Kai Kirkman on kai.kirkman@propelinfo.com.

Whitbread hires Joe Teixeira as MD for restaurants division: Whitbread, the owner of the Premier Inn hotel brand, and Beefeater and Brewers Fayre restaurant brands, has hired Joe Teixeira, the former chief executive of Boparan Restaurant Group (BRG), as the new managing director of its restaurants division. Teixeira was most recently managing director of Majid Al Futtaim, the shopping mall, communities, retail and leisure operator with venues across the Middle East, Africa and Asia. He spent more than five years at BRG, and was responsible for brands including FishWorks, Harry Ramsden’s and Giraffe. He was also previously managing director of Loch Fyne Restaurants, chief executive of Gourmet Gulf, and head of foodservice at John Lewis. In October, Whitbread said it had accepted offers on 51 of its pub restaurant sites for a total consideration of £56m. The company said its accelerating growth plan to optimise its UK food and beverage offer “to deliver a more tailored guest proposition”, is “on track” and as a result of its five-year plan the Premier Inn operator expects to increase its adjusted profit before tax versus FY25 by at least £300m. At the end of April, Whitbread, which operates the Beefeater, Bar + Block and Brewers Fayre brands, set out plans to exit 126 of its lower-returning branded restaurants as it seeks to optimise its food and beverage offer. The revamp, costing £500m over four years, will also include the conversion of 112 restaurants to 3,500 new hotel bedrooms.

Morgan Stanley – UK Pub sector looks set to remain in structural decline, with mounting wage cost pressures leading to an accelerated capacity exit: The UK Pub sector looks set to remain in structural decline, with mounting wage cost pressures leading to an accelerated capacity exit, according to a new report from Morgan Stanley. In its Economies of Ale: Best Pubs In a Tough Neighbourhood report, Morgan Stanley said: “Pubs that are large, well-invested, differentiated and freehold seem best positioned, and we think Mitchell & Butlers (M&B) and JD Wetherspoon (JDW) will both continue to take share. While we reduce forecasts and PTs for the Budget costs, their valuations are attractive in a consolidating industry, particularly from a FCF perspective, such that we end up equal weight on both. It is tempting to be outright negative on the pub industry. Demand is in structural decline thanks to social media alternatives, healthier lifestyles and cost of living pressures. Margins have been in decline for over a decade (see here). However, bigger, well-invested, and often branded pubs have been gradually taking share. Many of these tend to be owned by the listed managed operators, including M&B and JDW. On a smaller estate size, their combined revenues are up in the mid-teens since 2019, and their revenue market shares have increased sharply in the last decade (4.3% to 5.4% for M&B, 3.0% to 4.4% for JDW, here), and profits have been resilient. Their last updates showed like-for-likes +4%/+6%. For an average free house or tenanted operator, we show how the Budget impact could see profits hit by one-third or more (including the removal of small company rates relief, here), much bigger than the hit at these two companies.” The report continued: “M&B and JDW have now quantified the impact of the UK Budget's increase in National Insurance and Living Wage costs (see here), both similar to our original estimates (see here). Both seem confident of mitigating some, if not most, through LfL sales growth (including pricing) and efficiencies. This leads to our EPS forecasts falling in the mid-single digits for M&B (aided by a good track record of efficiencies) and in the mid-teens for JDW (impacted by its lower margins). Our price targets fall in sympathy, to 300p for M&B (-6%) and 740p for JDW (-9%). Both companies own the majority of their pubs, and both trade at significant discounts to NAV (e.g. M&B 0.5x here). The industry has been consolidating for years, but remains highly fragmented, with the biggest player by pub numbers having an 8% share. Private equity owns 11k pubs or one-quarter of the industry (the main players being TDR, CKA, Proprium, Apollo, Fortress here), and Fortress's recent bid for Loungers is a vote of confidence in an unloved listed sector.”

 

Claridge’s owner planning to nearly triple its number of hotels over the next decade: Claridge’s owner Maybourne is planning to nearly triple its number of hotels over the next decade, expanding into Paris, New York, Miami and Dubai to tap into booming demand for luxury travel. The company, which owns and operates six hotels – four in London and one each in Beverly Hills and the French Riviera – is looking to have 15 to 17 by 2035, according to co-chief executives Gianluca Muzzi and Marc Socker. Half of these would be management contract only, rather than under Maybourne’s ownership. “Before, [our focus] was mostly around the hotels, to preserve their identity, but what we are doing now is to establish and strengthen the presence of the management company, Maybourne itself,” Muzzi told the Financial Times. Maybourne, which is ultimately owned by Qatari royals Sheikh Hamad bin Jassim bin Jaber al-Thani and Sheikh Hamad bin Khalifa al-Thani, will open a hotel and serviced apartments in Saint-Germain-des-Prés in Paris. Muzzi said it would be “another historical landmark hotel, similar to the Connaught and Claridge’s in London”. It is also planning another UK hotel in a historic building in Hampshire, while Dubai and New York hotels will be newly built. “We would end up being, probably by the end of the decade, at maybe 15, 16 or 17 hotels, mainly in urban gateway cities,” said Socker. He added there were also plans to expand into Asia further into the future, in places such as Singapore and Tokyo. The expansion by the owner of some of London’s best known hotels comes as luxury travel continues to benefit from a post-pandemic boom. In London, average daily room rates for luxury hotels rose by 42% between 2019 and 2023, compared with a 27 per cent increase for the whole market, according to real estate company CBRE. “Given the golden age of travel and [that] people are looking for new experiences, we want to create a strong management company and a strong lifestyle brand,” Socker said. “Maybourne before was more a [business to business] brand. Now we’re coming out with the consumer brand and are prepared to enter into these new commercial ventures.” Socker said that Maybourne would launch a “membership community” next year which would give exclusive access to some services and parts of its hotels. It will also license its spa and wellness brand to be operated elsewhere. Maybourne has been in expansion mode following the pandemic. The Emory, its first London hotel in 50 years, added to its two international properties, the Maybourne Beverly Hills and the Maybourne Riviera on the Côte d’Azur, when it opened in July. The company reported turnover of £29.1m for the year ended December 2023, up 40% year-on-year. Its pre-tax losses were £11.1m, widening from £6.1mn the previous year, owing to interest expenses from intercompany loans.

 

US burger, shake and craft beer concept Black Tap to add four more UK locations in the coming year: US burger, shake and craft beer concept Black Tap is set to add four more UK locations in the coming year, Propel has learned. It comes after the brand last month confirmed the location of its second UK site, having signed a deal with Landsec to open a 5,000 square-foot flagship restaurant at Piccadilly Lights. Black Tap, which currently operates seven sites across the US and 24 sites globally, made its UK debut last week with a launch in Westfield Stratford City in London, and previously said that would be followed by the opening of a second larger flagship site in early 2025. The brand was founded in 2015 by New York entrepreneur Chris Barish – a long-time promoter, nightclub owner and former business partner of Gordon Ramsay – and Julie Mulligan. “When we founded Black Tap in 2015, in a small, 15-seater space in New York’s Soho, we couldn’t have imagined we’d be here today opening our first London site,” the founders said. “It truly marks an incredible milestone for us, for the business, and for everyone who has supported us along the way. We hope for our existing fans this space will be a little slice of home, and for new fans, we can’t wait to welcome you all through the doors.” The project for the 5,000 square-foot space has been led by design agency Harrison and includes a distinctive feature wall combining an iconic boombox installation with domed mirrors. Other features include a custom-designed gantry system displaying drinks on an angled frame, and graffiti artwork and murals from New York artist Bradley Theodore. Gillingham Bell acts for Black Tap.

 

Experts warn that second-hand smoke poses only a low risk for healthy people but could harm hospitality workers: Outdoor second-hand smoke poses only a low risk for healthy people but could harm the unwell and hospitality workers, experts have warned ahead of a ban. Under the Tobacco and Vapes Bill, the Government is planning to make it illegal to smoke in playground and outside schools and hospitals. The outdoor smoking ban had originally included pub and restaurant gardens but Wes Streeting, the health secretary, has indicated that it will be dropped to avoid causing harm to the hospitality industry. Speaking ahead of a Commons debate on the Bill in January, experts said that concentrations of smoke in outdoor venues was low and “likely to present a low risk for most healthy people”. However, they warned there was no absolute safe level of passive smoke inhalation and argued that workers, and people with heart or lung issues, were “particularly vulnerable”, reports The Telegraph. Sean Semple, a professor of exposure science at the Institute for Social Marketing, University of Stirling, said: “It may be a bit of a nuisance if you’re fit and healthy, but if you’ve got asthma and you’re working in that environment, then these exposures are really going to add up. The World Health Organization says there is no safe level of second-hand smoke exposure. I have asthma, and if I was being occupationally exposed to second-hand smoke, and knowing that I was one of a very small number of workers now being legally exposed, then I might not be very happy about that.” Dr Rachel O’Donnell, a senior research fellow at Institute for Social Marketing and Health, at Stirling, said: “When we think about exposure to second-hand smoke in outdoor settings, in pubs, in restaurants, we think about that sort of occasional customer exposure, the nuisance element of it when people are out enjoying a meal with friends. But we also need to be reminded that this is a repeated occupational exposure for those who are working in hospitality and serving drinks and food. Now, concentrations of second-hand smoke in these settings are generally low, and they’re likely to present a low risk to health for most healthy people. But there’s no safe level of exposure to second-hand smoke. We know that second-hand smoke is its known carcinogen, and on that basis, those exposed in the hospitality sector have a right to be protected.”

 

Minimum wage and National Insurance increases ‘to cost 150,000 jobs’, with sectors such hospitality expected to be hit particularly hard: Rachel Reeves’s raid on employers will cost 150,000 jobs, a top economist has warned, as businesses brace for higher national insurance payments and steeper wage bills. The number of workers in pubs, restaurants and hotels has already fallen by 90,000 since the Tories increased the minimum wage by almost 10% in April of this year, according to Andrew Wishart, a senior economist at Berenberg Bank. He warned that more job losses would come when the legal minimum wage increases by another 6.7pc in April 2025., reports The Telegraph. It will coincide with a planned rise in national insurance contributions (NIC) paid by employers on their workers’ wages. Mr Wishart said: “The UK is approaching the highest level of minimum wage achievable without triggering significant job losses. A quarter of staff in the accommodation and food sector are paid less than the national living wage (NLW), reflecting the sector’s use of younger staff that are not bound by it. Even so, with the eligibility of the wage floor being extended to younger workers and many over-21 adult employees earning the NLW, median hourly pay in the sector rose by 9.1% year-on-year in 2024, forcing companies to make changes. Part of the response has been a definitive reduction in staff headcount. The number of people employed by the sector has dropped by 2.6% since March 2024 (just before the 2024 rise in the NLW), compared to an unchanged number of people in employment across the whole economy.” Meanwhile James Moberly, economist at Goldman Sachs, said unemployment would rise by around 0.2 percentage points as a result of the NIC increase. He suggested companies would initially react by employing fewer workers before they could, over the longer-term, pass on the cost of the higher tax to their staff in the form of smaller pay rises. He added: “The tax change notably increases firms’ employment costs, with the impact being proportionately larger for lower-paid employees because of the change in the threshold.”